Chapter 4 Selected financial reporting and disclosure issues.ppt

Chapter 4 Selected financial reporting and disclosure issues in the global contest Learning Objectives: Identify the effect of inflation on financial reporting and discuss the two main inflation-adjusted accounting models. Examine the issues related to accounting for goodwill and intangible assets and discuss the main accounting approaches related to them. Highlight the costs and benefits of geographic segmental disclosure and review the new FASB and IASC standards on segmental reporting. Discuss the growing demand for social reporting including employee and environmental disclosures. 一、Accounting for changing prices Inflation-Adjusted Accounting Models General Price Level Adjusted Model Current Cost-Adjusted Model (一) General price level adjusted model (historical cost/constant purchasing power ) 1.Objective: P86 2. Procedure: (1) Obtaining historical-cost-based financial statements. Monetary items---cash,receivables,payables Non-monetary items---They must be adjusted to reflected the effect of inflation. Adjustment factors (2) Income statement items Revenues,expenses and income tax---the adjustment factor is CPI at the end of the year/average CPI Cost of goods sold Depreciation expense and amortization expense (3) Compute the net monetary gains and losses It addresses the problem of adding”apples and oranges”. 一、基本特点 二、基本程序 （二）Current cost adjusted model(Current cost/nominal purchasing power) 1. Definition 2.Procedure(p92) (1). Net income in CCA=operating income+realized holding gain+change in unrealized holding gain (2). Realized holding gain Merchandise: COGS(RC)-- COGS(HC) Fixed assets: Depreciation expense(RC)-- Depreciation expense(HC) (3). Unrealized holding gain Merchandise: Inventory(RC)-- Inventory(HC) Fixed assets: Book value(RC)-- Book value(HC) 3.review 1. It takes physical approach to measuring wealth and income. 2. Defect: (1)For certain types of fixed assets,determining current cost can be highly subjective. (2) For other assets,cu